SUMMARY: The FDIC is revising its Statement of Policy on Liability of
Commonly Controlled Depository Institutions (Statement of Policy) which
sets forth the procedures and guidelines the FDIC uses in assessing or
waiving liability against commonly controlled depository institutions
under section 5(e) of the Federal Deposit Insurance Act. The revised
Statement of Policy removes the application procedures for requesting a
conditional waiver of the cross-guaranty liability from the Statement
of Policy and incorporates those same procedures into Sec. 303.245 of
the FDIC's Rules published elsewhere in today's Federal Register.

SUPPLEMENTARY INFORMATION: In accordance with section 303(a) of the
Riegle Community Development and Regulatory Improvement Act of 1994 (12
U.S.C. 4803(a)), the FDIC conducted a systematic review of its
regulations and written policies and determined that it was appropriate
to revise the Statement of Policy. As a result of this review, the
Board of Directors of the FDIC revised the Statement of Policy
Regarding Liability of Commonly Controlled Depository Institutions to
move the application procedures for requesting a conditional waiver of
cross guaranty liability from the Statement of Policy to part 303 (12
CFR part 303). Specifically, the contents of an application for
requesting a conditional waiver of liability will be located in
Sec. 303.245. The purpose of this revision is to place virtually all of
FDIC's application procedures into one regulation to facilitate ease of
use.
The FDIC received two comments regarding the revision to the
Statement of Policy. Both of the commenters supported the FDIC's
proposal to revise the Statement of Policy.
For the above reasons, the FDIC is adopting the following revision
to the Statement of Policy:

Liability of Commonly Controlled Depository Institutions

Introduction

Section 5(e) of the Federal Deposit Insurance Act (12 U.S.C.
1815(e)), as added by section 206(a)(7) of the Financial Institutions
Reform, Recovery, and Enforcement Act of 1989, creates liability for
commonly controlled insured depository institutions for losses incurred
or reasonably anticipated by the Federal Deposit Insurance Corporation
(FDIC) in connection with (i) the default of a commonly controlled
insured depository institution; or (ii) any assistance provided by the
FDIC to any commonly controlled insured depository institution in
danger of default. In addition to certain statutory exceptions and
exclusions contained in sections 5(e)(6), (7) and (8), the FDI Act also
permits the FDIC, in its discretion, to exempt any insured depository
institution from this liability if it determines that such exemption is
in the ``best interests of the Bank Insurance Fund or the Savings
Association Insurance Fund.''
The liability of an insured depository institution attaches at the
time of default of a commonly controlled institution. It is completely
within the discretion of the FDIC whether or not to issue a notice of
assessment to the liable institution for the estimated amount of the
loss incurred or reasonably anticipated to be incurred by the FDIC.

Guidelines for Conditional Waiver of Liability

The FDIC may, in its discretion, choose not to assess liability
based upon analysis of a particular situation, and it may entertain
requests for waivers from affiliated or unaffiliated parties of an
institution in default or in danger of default. The determination of
whether an exemption is in the best interests of either insurance fund
rests solely with the Board of Directors of the FDIC (Board). Should
the Board make such a determination, a waiver will be issued setting
forth terms and conditions that must be met in order to receive an
exemption from liability (conditional waiver of liability). The
following guidelines apply to conditional waivers of liability under
the provisions of this section:
(1) A conditional waiver of liability will be considered in those
cases where the waiver facilitates an alternative that would be in the
best interests of the FDIC. For example, a conditional waiver may be
granted when requisite additional capital and managerial resources are
being provided which substantially lessen the exposure of the affected
insurance fund. When a conditional waiver is granted to an unaffiliated
acquirer of an institution in default or in danger of default it will
be granted for a fixed period, generally not to exceed a period of time
reasonably required for existing problems to be identified and
resolved.
(2) If one or more institutions in a commonly controlled
relationship is otherwise solvent, well-managed and viable, it may be
in the best interest of the FDIC to waive or reduce claims against such
entities. In determining whether a conditional waiver is appropriate,
consideration will be given to actions of a holding company which may
contribute to or diminish the FDIC's losses, as well as proposals to
strengthen other weakened institutions, if any.
(3) Procedures to request a conditional waiver of liability are
contained in Sec. 303.245 of the FDIC's Rules and Regulations, 12 CFR
303.245.
(4) In cases where an insured depository institution is sold to an
acquirer with no financial interest, directly or indirectly, in the
institution prior to the acquisition, it is the general policy of the
FDIC to forego the issuance of a notice of assessment to the acquirer
and its affiliated institutions in the event of a default of an insured
depository institution formerly affiliated with the acquired
institution. The FDIC will review all such transactions prior to making
a final determination to forego the issuance of the notice of
assessment.

Guidelines for Assessment of Liability

Whenever the FDIC determines that assessment of liability in
connection with a commonly controlled insured depository institution(s)
is appropriate, a Notice of Assessment of Liability, Findings of Fact
and Conclusions of Law, Order to Pay, and Notice of Hearing (Notice of
Assessment) will be served upon the liable institution. In assessing
the amount of the FDIC's loss and the liable institution(s'') method of
payment, the following guidelines shall apply:
(1) A good faith estimate of the amount of loss the FDIC shall
incur shall be based upon (a) the actual sale or calculation of loss
from a review by the FDIC of the assets and liabilities of the
institution prior to default or the granting of assistance; or (b) any
other cost estimate bases as explained in the Notice of Assessment.
(2) If there is more than one commonly controlled depository
institution to be assessed, each such institution is jointly and
severally liable for all losses; however, the FDIC shall make a good
faith estimate of the liability of each institution as determined by
(a) first assessing an initial amount on a pro rata capital basis that
brings about parity in the capital ratios of the liable institutions,
and (b) then apportioning any residual assessment on a pro-rata size
basis utilizing the most recent Report of

[[Page 44766]]

Condition. Any final assessment can be based on the estimated liability
of each institution by the FDIC and/or negotiations with the liable
institutions.
(3) In the event that any liable institution is closed prior to
paying an assessment, the amount assessed or to have been assessed
against that institution may be assessed against the remaining liable
institution(s).
(4) The FDIC, after consulting with the appropriate Federal and
State financial institutions regulatory agencies, shall establish in
each case a schedule for payment which may include a lump sum
reimbursement, as well as procedures for receipt of such payment.
(5) Once liability has attached, the FDIC will consider information
similar to that provided with a request for a conditional waiver of
liability in determining the amount of the estimated loss to be
assessed. Such information may also include suggested payment plans.